Florida’s Commercial Clearinghouse Plan Hits a Snag, With OIR and Board Concerns

The push for a clearinghouse for Citizens Property Insurance commercial policies appears to have hit a snag with little time to spare before a January deadline mandated by Florida statute.

“I looked at the numbers and the numbers make no sense and the implementation makes no sense,” Board Chairman Carlos Beruff said at Citizens’ Board of Governors meeting Wednesday. “So, we’re going to go back to the drawing board and figure it out before we bring a policy forward that we can afford and not continue to increase our costs for our ratepayers.”

He did not go into detail about what changes are needed, or what prompted his concerns. But Beruff’s comments came a week after Deputy Florida Insurance Commissioner Jane Nelson sent a letter to Citizens’ general counsel. She pointed out that Senate Bill 1028, signed into law in June, requires Citizens to amend its governing platform, known as its Plan of Operation, before establishing the clearinghouses.

The state-created insurer is in the process of finalizing a contract with the winning bidder, a Brown & Brown subsidiary, to administer one of the commercial clearinghouses required by the law. That platform ostensibly would help brokers and insurance agents move more Citizens’ policies to surplus lines insurers. The state Office of Insurance Regulation must review the plans before the clearinghouses can be set up—but cannot do so as things now stand, Nelson’s letter noted.

“As a result of having neither the amendment to its Plan of Operation establishing the clearinghouse program nor administrator contracts in place, Citizens has not been able to submit to the Office all of the documents necessary for the Office to complete its review,” Nelson’s letter reads. “The Office has requested information to cure deficiencies in the submitted information and has yet to receive satisfactory responses. Therefore, at this time the Office is unable to approve the clearinghouse program.”

Nelson’s boss, Insurance Commissioner Michael Yaworsky, had initially opposed parts of the clearinghouse bill as it moved through the Florida Legislature this spring. And a number of insurance agents have said the platform is unnecessary in a rapidly improving Florida market where more primary market carriers are writing more policies.

Sources in the Florida insurance arena speculated that with the Sept. 15 letter, Yaworsky and Nelson may be giving Citizens’ officials a way to quietly delay or kill the controversial plan.

Even if the board were to amend its Plan of Operation, that could take time and could open the door for other changes in Citizens’ operations. And once the changes are approved by the board, the Florida Financial Services Commission, which includes the governor and other top state officials, also would have to review the changes.

All of that may not be achievable before a Jan. 1 deadline established by the clearinghouse law. If Citizens were to challenge OIR’s position, that could eat up even more time.

Others said it’s simply a difference of opinion on the intent of the new law, and OIR and Citizens may be able to reach a compromise in coming weeks.

The OIR letter caught Citizens’ attorney, Brian Newman, off-guard.

“I did not expect to see a notice or rights attached to your letter, suggesting Citizens has the right to challenge your decision,” he wrote to Nelson on Sept. 16.

The firms chosen to manage the clearinghouse platforms are Brown & Brown’s Bridge Specialty Group (BSG) and Exzeo, which is majority owned by Florida-based HCI Group. Newman argued that those firms are the appropriate organizations to seek regulatory approval on the clearinghouse or raise challenges to OIR’s concerns.

“I respectfully suggest that the notice of rights attached to your letter to Citizens should be directed to BSG and Exzeo as the applicants seeking the Office’s approval to act as commercial clearinghouse administrators,” Newman wrote.

Citizens had not considered asking its board and the Financial Services Commission to approve the clearinghouse programs and their administrators this early, “before the Office provides its regulatory sign-off, as that does not appear to be the order contemplated by the new law,” Newman noted.

That said, “we are open to discussing a process to align our separate but shared obligations to implement this new law, and we will keep an open mind as to the appropriate order of achieving these statutory milestones.”

Citizens’ CEO, Tim Cerio, said at the board meeting that Citizens’ staff members had made a “Herculean effort” to meet other deadlines imposed by SB 1028. But he agreed that it’s important to nail down a clearinghouse plan that is beneficial to Citizens and policyholders.

“If there’s a deadline problem, we’ll deal with it,” Cerio said. “But it’s more important to get it right.”

It’s the latest development in the commercial clearinghouse saga that began with a push by Ryan Turner Specialty, a national insurance brokerage, and state Sen. Joe Gruters, who sponsored the enabling legislation last spring. Ryan ultimately did not win the contract, but was runner up in the bidding process on the surplus lines clearinghouse platform management.

Read more on the clearinghouse controversy here.

Topics Florida Commercial Lines